(While in Toronto recently, I met Sydney White who told me about Prof. John Hotson who was a leading Canadian exponent of banking reform. He died under suspicious circumstances during an operation in 1996. This is an excerpt from an article entitled “Understanding Money” which he wrote shortly before his murder. Needless to say, he has no Wikipedia entry.)

by John H. Hotson

The financial system the world has evolved on the Bank of England model is not sustainable. It creates nearly all money as debt. Such money only exists as long as someone is willing and able to pay interest on it. It disappears, wholly or partially, in recurring financial crises. Such a system requires that new debt must be created faster than principal and interest payments fall due on old debt.

A sustainable financial system would enable the real economy to be maintained decade after decade and century after century at its full employment potential without recurring inflation and recession. By this standard, a financial system that creates money only through the creation of debt is inherently unsustainable.

When a bank makes a loan, the principal amount of the loan is added to the borrower’s bank balance. The borrower, however, has promised to repay the loan plus interest even though the loan has created only the amount of money required to repay the principal-but not the amount of the interest.

Therefore unless indebtedness continually grows it is impossible for all loans to be repaid as they come due. Furthermore, during the life of a loan some of the money will be saved and re-lent by individual bond purchasers, by savings banks, insurance companies etc. These loans do not create new money, but they do create debt.

While we use only one mechanism – bank loans – to create money, we use several mechanisms to create debt, thus making it inevitable that debt will grow faster than the money with which to pay it. Recurring cycles of inflation, recession, and depression are a nearly inevitable consequence.

If, in the attempt to arrest the price inflation resulting from an excessive rate of debt formation, the monetary authorities raise the rate of interest, the result is likely to be a financial panic. This in turn may result in a sharp cutback in borrowing.

Monetary authorities respond to bail out the system by increasing bank reserves. Governments may also respond by increasing the public debt- risking both inflation and growing government deficits.

FOUR COMMON SENSE RULES

Governments got into this mess by violating four common sense rules regarding their fiscal and monetary policies. These rules are:

1. No sovereign government should ever, under any circumstances, give over democratic control of its money supply to bankers.

2. No sovereign government should ever, under any circumstances, borrow any money from any private bank.

3. No national, provincial, or local government should borrow foreign money to increase purchases abroad when there is excessive domestic unemployment.

4. Governments, like businesses, should distinguish between “capital” and “current” expenditures, and when it is prudent to do so, finance capital improvements with money the government has created for itself.

A few words about the first two of these rules…

1. There is persistent pressure from central bankers and academic economists to free central banks from the obligation to consider the effects of their actions upon employment and output levels so that they can concentrate on price stability.

This is a very bad idea indeed. Dominated by bankers and economists, central banks are entirely too prone to give exclusive attention to creditor interests to the exclusion of worker interests. Amending central bank charters to give them independence from democratic oversight, or to set up “price stability” as their only goal would complete their subjection to banker interests. Canada’s own Mackenzie King said it all, “Without Government creation of money, talk of sovereignty and democracy is futile.”

2. Anyone who understands that banks create the money they lend can see that it makes no sense for a sovereign government, which can create money at near zero cost, to borrow money at high cost from a private bank.

The fact that most governments do borrow from private banks is one of the greatest errors of our times. If a government needs money created to pay for public spending it should create the money itself through its own bank; or spend the money debt and interest free as the United States did during the Revolution and again during the Civil War. If a government does not wish to “monetize” its deficits during periods of unusual need such as wartime, it should either make up the deficit with higher taxes or borrow only from the non-bank public-which cannot create the money it lends to the government….

When the Bank of Canada encourages the Canadian government, provinces, and municipalities to borrow in New York and Tokyo, it is a betrayal of Canada. Where should they borrow when new money is needed for government spending? They should borrow at the government owned Bank of Canada, paying near zero interest rates-just sufficient to cover the Bank’s running expenses.

The Money Trust, an international cabal of ultra-powerful banksters, covertly controls the entire finances of the world for its own profit and pleasure. This elite cadre of criminals has deliberately brought the world to the brink of economic ruin so that banksters can seize properties and other tangible assets for non-payment of “loans” which they themselves had created out of thin air. This is a global fraud of unprecedented proportions.

The power to create money should be one of the most important functions of government, yet politicians in almost every country in the world unquestioningly hand this power over to private banking cartels. This puts the banksters in a position of supremacy over governments and government institutions like the law courts and gives them hegemony over all matters economic and financial.

As Mayer Amschel Rothschild once said, “Permit me to issue and control the money of a nation, and I care not who makes its laws…”

President James Garfield was even more direct in his assertion:

“Whoever controls the volume of money in any country is absolute master of all industry and commerce.” (Like Lincoln and Kennedy, Garfield’s assassination has been traced back to the banksters.)

Stephen Zarlenga, writing in The Lost Science of Money, says, “[The bankers] control the rationing of credit” and that they “are more in control of the society than is the legislature, executive, and judiciary, not to mention the citizens.”

The cunning Rothschild and his equally conniving successors developed a global network of central banks (almost all of them privately owned or controlled) that today does more to serve the interests of the House of Rothschild and their fellow conspirators than it does to serve the interests of the people of the nations for whom central banks were meant to serve. Allowing these banks to create money/credit out of nothing and then permitting them to charge interest on ‘nothing’ puts an onerous burden on the working people of every country where they are ensconced.

It is totally unnecessary to borrow from any of these thieving institutions. The degree that governments permit and support this madness makes them correspondingly complicit in this despicable crime against humanity.

In fact, borrowing from the banksters by governments, businesses, and individuals makes the prices of goods and property many times dearer than they ought to be. For example, when you mortgage a house for a term of 30 years or so, you end up paying back the price of up to three houses – one for you, and two for the banksters who didn’t actually loan you any of their own money in the first place. They have effectively stolen 20 years of your life’s energy!

It is quite enlightening to recall the words of William Paterson, one of the founders of the privately owned Bank of England in 1694:

“The bank hath benefit of interest on all moneys which it creates out of nothing.”

That is still very much the case today. Even the banksters themselves have been admitting as much…

“Banks lend by creating credit. They create the means of payment out of nothing.” Ralph M Hawtrey, British Treasury.

“I am afraid the ordinary citizen will not like to be told that the banks can and do create money. And they who control the credit of the nation direct the policy of Governments and hold in the hollow of their hand the destiny of the people.” Reginald McKenna, a former Chairman of the Midland Bank.

And here is a real eye-opener attributed to Sir Josiah Stamp, a director of the Bank of England in the 1920s:

“The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in iniquity and born in sin…But if you want to continue to be the slaves of bankers and pay the cost of your own slavery, let them continue to create money and to control credit.”

Sir Josiah bluntly lays it on the line. With words and phrases like “money out of nothing”, “sleight of hand”, “iniquity”, “sin”, and “slaves of bankers” he forthrightly condemns bankers as nothing but criminals who openly operate an international banking system of utter criminality and fraud. Sir Josiah warns us that if we continue to let the banksters control credit we unconscionably allow ourselves to remain debt slaves for all time.

Our entire system of taxes, duties, fees, licenses, statutes, etc., were designed by the banksters for the benefit of banksters. Almost all of our taxes go to pay the banksters for “loans” that they created out of nothing: income tax, motor tax, Value Added Tax, beer tax, whiskey tax, household tax, inheritance tax, septic tank tax, death tax, this tax, that tax, tax, tax, tax ad nauseam.

If we as a people issued our own money, debt-free and interest-free, based on goods and services provided by the people, there would be very little need for taxation (no income tax, no VAT, no motor tax, etc.). And everything would be much, much cheaper. The whole tax system, revenue commissioners, national debts, and so on, are constructs of the Money Power. They are meant to control us. They are designed to keep us impoverished by stealing our life energy from us (our labour). These taxes and controls are only there to vastly enrich the Money Power and to enslave us at the same time.

And there is this nonsense we hear every day in the mass media about economic growth and balance of payments. The only reason we need growth and increased consumer spending is to pay the ever-growing interest on the mushrooming national debt, a debt that was facilely keyed in with a few strokes on the banksters’ computers. This means plundering the earth and destroying natural resources to increase our consumption of hopelessly unnecessary trinkets. How the banksters must be laughing to see us scurrying along the treadmill of debt they craftily inflicted upon us.

What the people seem to have forgotten is that all wealth comes from the people themselves. The people are the true producers of prosperity in any country; they produce the food and other commodities that are needed to sustain life and increase or improve our creature comforts. Banks don’t produce anything of value. They are parasites that feed on the labours of the working people. Wall Street and the City of London and other financial centres around the world are nothing more than glorified gambling casinos. They add nothing to the wealth of a nation; in fact, they steal the wealth from the real producers.

Central Banks create money out of nothing. They allow commercial banks to do the same thing, to a large degree, but keep them on a financial leash. Fiat currencies such as the euro, the pound, the dollar, and others have nothing of value backing them. A few generations ago, most currencies were convertible to gold or silver or some other valuable commodity. Now, these currencies are inconvertible and are only valuable because governments say so (by decreeing them ‘legal tender’) and because people, in their unawareness, give them their confidence.

Our money today, whether cash or bank credit, is merely a bank’s ‘promise to pay’. It is mostly an empty promise because it is backed by nothing. U.S. economist Irving Fisher put it quite succinctly when he said the U.S. national circulating medium “is now at the mercy of loan transactions of banks, which lend, not money, but promises to supply money they do not possess.” This is indeed the great fraud of modern banking.

On the other hand, all real credit comes from the people. The ‘promise to pay’ behind the people’s credit is backed by the sterling promise of future labour. This is very valuable. In fact, it is so valuable that banks can actually encash or sell your promissory note (your promise to pay) for face value or more, even before they give you a “loan”! But banks don’t inform you of this huge deceit by which they mislead and defraud you. They never tell you that it is you, the borrower, who really funds the loan!

What the banks are actually doing is intercepting your gilt-edged credit, which is backed by your future life’s labour, and repackaging it as their own credit, which is backed by nothing. Having stolen your credit, they take you for an idiot and force you to pay them back your own money which they claim to have “loaned” you, and then they compound the crime by charging you interest on money that was actually created by you. Not even the mafia would ever find the chutzpah to stoop so low.

But is there a way to beat the banksters?

Across the internet today, and in some excellent published books and DVDs, there are many proposals for setting up just and equitable monetary systems. We have the proposed N.E.E.D. Act from Congressman Kucinich in the U.S. (in conjunction with the American Monetary Institute), the Social Credit system from C.H. Douglas, Mike Montagne’s Mathematically Perfected Economy, and a host of other proposals including those of E.C. Riegel and Thomas Greco Jr. (whose research features heavily in the rest of this article).

All these systems have certain merits which should be teased out and explored in a genuine forum of the people. It is said that ‘knowledge is power’. Therefore, the people can truly empower themselves by learning and studying and unearthing information that the banksters and their lapdogs would prefer had remained hidden. Only the people can decide what will work in the best interests of the people. Remember Lincoln’s Gettysburg address: government should be of the people, by the people, for the people.

However, this would be a revolutionary move and such ground-breaking events are unlikely to happen overnight. But is there something we can do now, today, at local community level?

Yes, there is – create a local community currency.

A good local community currency will give local businesses and individuals interest free credit, promote local goods and services, increase the prosperity of the community, and retain the wealth within the local area. This is something the banksters do not want to see. It lessens their ability to control people and separate them from their hard-earned money. Furthermore, those participating in local currency schemes will really come to comprehend what “money” really is, how it is created, and how it really works. This tends to show up the deception and fraud inherent in the present banksters’ system.

These local community currencies or exchanges are known as Mutual Credit Clearing Associations or Direct Credit Clearing Associations. They are simply a system of crediting sellers and debiting buyers – all without using money or requiring interest to be paid. Money is not needed because goods and services pay for other goods and services. The exciting thing about this system is that it has the singular capability of making banking and money obsolete. Direct Credit Clearing can, for the first time in history, prove crucial to the advancement and sustainability of civilization on our perilous little planet.

Consider this quote from E.C. Riegel:

“If the government were obliged to come to the people for money instead of vice-versa, the people would keep government under control and operate their economy satisfactorily with prosperity and peace resulting. The peoples of the nations do not make war. For them peace is the natural and permanent order. Wars are planned and perpetrated by politicians and their diplomats; and the money power of government is the means by which the people are maneuvered into wars.”

While there is evidence of community currencies going back to the early 1800s, the greatest surge has occurred over the past few decades or more. Today, there are about 2,500 different local currency systems operating throughout the world. One of the longest surviving and most successful of recent years is the Wir in Switzerland. Set up in 1934, it is now a major banking force in Switzerland.

An interesting electronic currency that can be transmitted anonymously across the Internet is the Bitcoin. It has no central control and is impervious to government or bankster influence or meddling. It is the most widely used alternative currency and the value of Bitcoins presently in circulation is about one hundred million U.S. dollars. All transactions are totally confidential and untraceable.

In Ireland, there are a number of local currencies from Cork to Monaghan and other places in between. The numbers are growing, something that tends to happen in a recession or depression. Most of these use mutual credit systems, like LETS. Other innovative communities such as those in Clones, Co. Monaghan, accept and exchange goods and services for the retired currency, the Punt. However, unless you possess Punts this exchange system is rather limited.

Then there are local currencies that operate like department store coupons; yet others are backed by the national currency (legal tender).

But to be truly independent and open to everyone, a community should employ a good Mutual Credit Clearing system. Michael Linton, the originator of the LETS system in Canada in 1983, once defined money as “an information system we use to deploy human effort.” This is an excellent definition. Money is an accounting system, a way of keeping score.

For example, let’s say that in a certain community we have a number of traders called Amber, Bronze, Coral, and Denim and each one owes the other trader ₵1,000. (₵ is the symbol for a Credit which is equivalent to one Euro.)

Under the present banking system, one or more of these traders will have to borrow money from the bank to pay his creditor €1,000. This means interest charges and bank fees. If Amber gets paid by Denim he will pay his own creditor, Bronze, with the proceeds or, if he has already borrowed money to pay Bronze, he will repay his bank loan, with interest. And so on with the others.

But under Mutual Credit Clearing, all they have to do is adjust credits/debits between them and settle accounts in this manner. This is done very simply, without using money and without paying a third party (the bank) interest or fees.

The benefits of Mutual Credit Clearing are as follows:

There will never be a shortage of credit in a community as long as people are willing to exchange their labour for mutual benefit.

The participating traders themselves allocate credit on a democratic and local basis according to their own rules.

Local traders and participants can save large amounts in avoided interest costs and bank transaction fees.

Local traders and participants can avoid the negative effects of inflation of the national currency, restrictive credit practices of banks, and other global economic difficulties.

How much credit should a trader be allowed within a local community system?

Riegel says, in Flight From Inflation, “Each person or corporation is entitled to create as much money, by buying, as he or it is able to redeem by selling.”

Other successful systems recommend that an individual’s credit should not exceed that individual’s typical turnover in a three month period. But on start-up, it is normally recommended to limit credit to the equivalent of 200 to 300 Euro.

Some systems use hand-written ledgers for registering all trading details and listing individual balances. Others prefer to keep computerised records. And there are those which issue paper currency notes that are used just like cash. And there are systems that like to combine both ledger credits/debits and paper currency.

There is not enough space here to go into the minutiae about how these systems work. Those who are interested in setting up local community currency schemes can Google the names and organizations mentioned above or contact the author for more information (info@foolscrow.net).

There are a little less than half a million people currently unemployed in Ireland. Undoubtedly these figures are understated by the government, but in a population of some four and a half million souls this number of unemployed is totally unacceptable. Most of these people are able and willing to work. All they require is a simple method with which to exchange their labour. But the government continues to sit on its hands.

There should be virtually no unemployment in a country or community where a great majority of the people are willing to exchange their labour (goods or services) for the labour (goods or services) of others. That this intolerable situation exists is a damning indictment upon those who profess to run our country!

Once again, it is patently obvious that the Irish Government is not working in the interests of the people who put them into a position of power and trust. This government, like previous governments and most politicians, work mainly in the interests of the Money Power. The only way to describe this state of affairs, my dear brothers and sisters, is sheer unadulterated treason!

E.C. Riegel again, “When government is invested with money power it rises above the citizen and under the profession of protecting him may actually constitute the greatest threat to his well-being and safety.”

And Riegel, more optimistically:

“When man has mastered money he shall have mastered not only his economic problem of prosperity but also his political problem, for he will see that money has no place in state functions, and, the money power being entirely in his own hands, he will easily master the state and clearly define its services.”

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1.Banks create money out of nothing -this is a scam.You borrow money from the bank, the band doesn’t have the money in the first place.

2.Government can print money by themselves , instead they borrow from bankers and need to pay interest on the loans.The people are charged taxes and need to do labor.

3.If everyone go to bank at the same time to withdraw money , bank couldn’t pay it back.

4.To fight banking scam is to close the account or not to take debt/loans and not to use credit cards.

5.The taxes that are paid to the government contains 3 full months of a year.

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Turning Warren Buffett’s quick-fix deficit plan into reality

Warren Buffett, in a recent interview with CNBC, offers one of the best quotes about the debt ceiling:

“I could end the deficit in 5 minutes,” he told CNBC. “You just pass a law that says that anytime there is a deficit of more than 3% of GDP, all sitting members of Congress are ineligible for re-election.”

The 26th amendment (granting the right to vote for 18 year-olds) took only three months and eight days to be ratified! Why? Simple! The people demanded it. That was in 1971… before computers, e-mail, cell phones, etc.

Of the 27 amendments to the Constitution, seven (7) took one year or less to become the law of the land…all because of public pressure.

Warren Buffet is asking each addressee to forward this email to a minimum of twenty people on their address list; in turn ask each of those to do likewise.

In three days, most people in The United States of America will have the message. This is one idea that really should be passed around.

Congressional Reform Act of 2011

No Tenure / No Pension. A Congressman collects a salary while in office and receives no pay when they are out of office.

Congress (past, present & future) participates in Social Security. All funds in the Congressional retirement fund move to the Social Security system immediately. All future funds flow into the Social Security system, and Congress participates with the American people. It may not be used for any other purpose.

Congress can purchase their own retirement plan, just as all Americans do.

Congress will no longer vote themselves a pay raise. Congressional pay will rise by the lower of CPI or 3%.

Congress loses their current health care system and participates in the same health care system as the American people.

Congress must equally abide by all laws they impose on the American people.

All contracts with past and present Congressmen are void effective 1/1/12. The American people did not make this contract with Congressmen. Congressmen made all these contracts for themselves. Serving in Congress is an honor, not a career. The Founding Fathers envisioned citizen legislators, so ours should serve their term(s), then go home and back to work.